There are two distinct phases in an individual's financial lifecycle, the first being the earning and wealth creating phase, and the second, the wealth reaping and distribution phase. Having discussed the first phase in Grow your own money tree, let us now dwell on the second phase, to help you build retirement and estate planning strategies.

Most people in the second phase seem to have one question on their minds: How can I get a steady rate of income year after year from a safe instrument?

This is a pretty shallow way of looking at it, and can get you only shallow answers.

Let me illustrate:

An annuity product gives you a steady income for as long as you live, and your family gets a big packet of money should you pass away. Suppose you need Rs 25,000 pm to survive comfortably, this means you would have to invest around Rs 50 lakh (around 6 per cen).

So where's the problem?

Inflation: After 10 years, Rs 25,000 will be worth only about Rs 15,000, allowing for 5 per cent inflation.

This means an increased income stream, depending on your lifestyle and needs.

Emergencies: You may urgently need funds, or help your children or friend, or just take quick advantage of an opportunity.

But your money is locked - if you withdraw, your cash inflows will stop, and if you re-deploy afterwards, you may not get the earlier rate of return.

Funds: What if you need Rs 25,000 to survive, but don't have a Rs 50 lakh (Rs 5 million) corpus to begin with?
 
Moral of the story: not a single retirement/ pension product available today is remotely close to meeting your requirements!

What should you do?
 
First off, you should know for how many years your funds will survive. You don't want to be in a situation where at 70-80+, you have outlived your resources, and have to worry about how you can manage now.

Also, have your advisor create an increasing income stream for you - the increase being at least in line with inflation rate.

Now find out the following:

• Is your product flexible enough to let you to take advantage of opportunities and give you liquidity at minimal transaction costs?
• What are the effects of taxation on your chosen strategy?
• In case of a medical emergency, who will manage your funds and how?
• In case of your death, how can you ensure that funds are distributed among your spouse/ children, as you like it?

Aswers to these questions are vital and yet these queries are not addressed. No wonder then, that people dread the prospect of retirement.

Financial matters at this stage are complex. But if planned well, you can enjoy a good and prosperous second phase in your life.

As for the above example, to have a Rs 25,000 pm income with an annual increment of 5% to match inflation, an amount of Rs 36 lakh can also suffice.

These numbers should give you an idea of the kind of cash inflows you will need when you approach 60:

Age	Monthly income support required @ 5% inflation
60	25,000
61	26,250
62	27,563
63	28,941
64	30,388
65	31,907
66	33,502
67	35,178
68	36,936
69	38,783
70	40,722
71	42,758
72	44,896